Wednesday, 17 September 2003

An open letter to the editors of Ad Age.

RE: 4A's takes issue with compensation consultants.

Dear Editors:

It's remarkable to see the topic of agency margins and profits even on the negotiating table with clients and their consultants. Kudos to the 4A's (American Association of Advertising Agencies) for identifying this problem and thanks to Ad Age for framing the real issue in your editorial.

The issue, of course, is not one of price or the source or quality of databases used to negotiate discounts with agencies. The issue is perceived value of the services rendered by the agencies in the first place.

We all know that clients can be hard to read. My conversations with small and mid-sized shops around the world reveal the same problems when it comes to getting clients to set budgets or clearly outline their expectations.

The result often seems to be agencies that let costs get out of hand and clients disappointed with one aspect or another of the agency's service on their business. Duplicated and unnecessary services seem to be the biggest thorn under the saddle and contribute greatly to the inevitable decision to put an account up for review.

I suspect that underneath it all, these concerns are similar to those held by large clients now conducting compensation reviews and triggering the 4A's reaction.

If clients are trying to find ways for their agencies to do more with less, the answer is not to put the squeeze on profit margins but to work with their agencies to optimize their performance. This often entails consultants working on both sides of the relationship to identify areas of overlapping capabilities, spot processes that don't synch up, clarify expectations on both sides and establish budget parameters for work.

The end result can be demonstrable savings, efficiently produced work, a constant flow of new ideas to the client, lower production budgets and, quite often, better margins for the agency.

Mike Bawden
Brand Central Station

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